ED SCHULTZ, HOST: White House officials are now saying that they‘re surprised that the left of the left feels so strongly about this. We‘ll see what Congress and Dennis Kucinich has to say about that.

The president just got an earful from people of faith. Tens of thousands are now calling on him to see that this is deeper than politics. This is about morality. A key leader in that movement, Reverend Jim Wallace, will join me at the bottom of the hour. You‘re going to want to see it.

Plus, Congressman Barney Frank knows how to lay the smack down. A whack job got in his face in a town hall meeting last night and he unloaded on her. And I‘ll show you the video of that in my “Playbook” and the (INAUDIBLE) and “Psycho Talk.”

All that, a great panel. Plus I‘ll give you the latest on the Sestak-Specter race in Pennsylvania. But first, tonight‘s “Op-Ed.”

Well, the White House is—well, they‘re looking for direction. So I thought I‘d help them out tonight again. Health care is a not a split issue. Look at this, 91 percent of people want some kind of health care reform in this country. That‘s from our MSNBC News poll of yesterday.

Now, people who don‘t want reform? Well, they‘re elected Republicans. They want to see the president fail. They made that clear time and time again. It‘s time for the president to draw the line in the sand about public option.

If he can‘t stand up to the Republican opposition, I don‘t think he deserves the support of the left. That‘s what this election was all about. And he won‘t have it if he caves in on this issue.

Now Robert Reich says that we need a march on Washington for health care reform. You know, I‘m OK with that. I proposed that some time ago as well, but I thought we had a march on Washington. It was called inauguration day.

These are just some of the millions of people who got the president elected. After being kicked in the teeth for eight years by the Bush administration and Republicans on health care, are you willing to allow that to happen again?

I don‘t think liberals are going to have any stomach for supporting Democrats in the next election if they can‘t show some spine and stand up to the very people that put them in office or in power, if you want to call it that.

Now there‘s a lot of numbers that are being tossed around out there when it comes to health care. Let me give you a couple of numbers. Let‘s see, 10, 12 and 14. As in mid-term, presidential election and then another mid-term. It‘s a generational fight.

If the Democrats fail to get health care reform, voters will see them as weak and ineffective leaders. The Republicans want to rush. They want to push, and they want to pull. They want to do it all. This is an election coming up that they are going to do nothing but demonize the Democrats.

So the stall game is what it‘s all about. Oh, there‘s going to be a September stall, you can count on it. Now, in 2010, ‘12 or ‘14, the Democrats, folks, they may not have the majority. They may not have 60 seats in the Senate. They might not have a majority in the House the way things are going.

So this is a defining moment for President Obama and the people who put him in office. Our NBC News poll also shows, roughly, if you can believe this, half the Americans out there believe four of the biggest most disgusting lies about Democrats‘ health care plan.

The Republicans are feeding the lying machine. And yet Obama officials are ready to throw their own base overboard for some watered down piece of garbage bill written on Republican toilet paper?

The White House is living in a vacuum if they think liberals aren‘t serious about dropping their support. There is a divide being created. They kept saying, well, we‘re close. Close to what? Close to cave into Grassley and his buffoons when it comes to health care reform?

The Republicans, on this issue, oh yes, they‘re free traders, but when it comes to health care, they are protectionists. They‘re not progressives. Now what they‘re protecting is the insurance industry.

Draw your line in the sand, Mr. President, and you will see ground swell support for your administration, your agenda and your party. You cave in, Mr. President, you cave in on this, and I think a lot of these people who came out and supported you and got into the process for the first time, the fear here on the Democratic side, on the progressive side, on the liberal side, and how many other names you want to label, the fear is that they could be gone and this opportunity could be dreadfully missed.

Get your cell phones out, it‘s time for the text survey. Here‘s the question about President Obama tonight. Is President Obama willing to say no to bipartisanship? Text 8 for yes, b for no to 622639. We‘ll bring you the results later on in the show.

I feel—well, I feel it‘s time to fish or cut bait. I think that the Republicans have staked their claim. No to public option, no to co-op, which I think is a joke anyway, but when is the president going to realize that the Republicans are not serious about reform, and I‘d like you to speak to that.

DEAN: Well, actually, I think the events—let me say two things. First of all, I think the events of this weekend were defining in the sense that the Republicans have made it clear they have no interest in helping in any way to pass health care reform.

And that‘s a pattern of theirs. They used that against Bill Clinton in 1994 but they also used it against Barack Obama by not—I don‘t think any of them voted for the stimulus package in the House and maybe one or two in the Senate, if that.

So, you know, the president knows how to get big legislation passed the Congress. And it‘s clear that, although the American people would like bipartisanship, the Republicans are not inclined to do that so we‘re on our own. And that‘s a very good thing.

SCHULTZ: So.

DEAN: Because now we can get down to the business of seriously, seriously drafting a bill that‘s going to work. And let me just make one other point. This is really not a left versus right issue or a liberal issue. This is what works.

I‘m not in this because I‘m an ideological left winger. If I were, I‘d be for single-payer. I‘m in this because this works. What the president has done is give people a choice. They can choose a single-payer or a public option or whatever you want to call it, so something like what people over 65 have in Medicare, or they can choose to stay in the private sector.

That‘s the way it should be. Leave a form up to the individual Americans. Don‘t let the Congress take it away. Don‘t let the insurance companies take it away. Don‘t let the bureaucrats take it away. And I think it‘s great plan. And we got to stick to it.

SCHULTZ: Dr. Dean, there are a lot of Democrats out there who are disappointed, thinking that the president hasn‘t been strong enough on the public option. Is it time, in your opinion, for him to step up and tell the Grassleys of the world this is where we‘re going to go on health care reform? You‘re either with us or you‘re against us because this is where the American people are.

What do you think about the president drawing that line in the sand?

DEAN: Well, I think—well, look, I think that what the president—when the president draws lines in the sand it probably ought to be privately, not publicly. But I think the president—this is the president‘s decision time right now. I think you‘re right about that.

I think that the evidence is very clear that a real health care reform is not going to be contributed to in anyway by the Republicans in Congress, even though a lot of people in the Republican Party would like health care reform and would benefit from it.

So I think it‘s going to happen. I think we‘ll have a bill on the president‘s desk in December. I think it‘ll contain a nice strong public option and also the opportunity to get health care for all Americans.

SCHULTZ: That‘s what makes me nervous, is because Senator Conrad, who‘s over on the Senate Finance Committee has made it very clear in interviews that their votes for a public option do not exist in the Senate. So is it that a signal.

DEAN: I think that‘s not.

SCHULTZ: Pardon me?

DEAN: That‘s not so. What he has said is there‘s not a majority of the votes. But there‘s a huge majority of the votes in the Democratic caucus. So this comes down to the Democrats only. It‘s very clear that the Democratic caucus is going to want a public option.

DEAN: And I don‘t believe for a moment that he‘s going to vote against health care reform.

SCHULTZ: He said at a town hall.

DEAN: Not for a moment.

(CROSSTALK)

SCHULTZ: Wait a minute now, Howard. He said at a town hall meeting

in Carrington, North Carolina just last Thursday, he said he would not vote

and he used the word vote—he would not vote for health care reform that includes a government-run plan. Now that‘s a public option.

DEAN: Well, he—he‘s trying to do his best to get out of that the next day. Whether he was misquoted or whatever happened, but he claimed he was misquoted. I think these Democratic senators, they‘re going to do the right thing for the country.

Look, the blue dogs, in my opinion, Ed, and there are many who don‘t agree with me, I think the blue dogs and progressives came to a very good compromise in the House. They did a lot for small businesses. They tried to help the reimbursement for primary care physicians.

And the House bill is in very, very good shape. The Dodd-Kennedy bill is—from the health education labor and pension committee is in very good shape. That means everybody that‘s had a chance to vote on this bill has done the right thing so far in the Senate and the House and I‘m relying on the finance committee to do the same thing.

And now that the Republicans have made it clear they‘re not interested in any kind of compromise, I think these—people are going to do the right thing and we‘re going to get a real health care bill. It‘s going to have a real public option in it.

SCHULTZ: And if we can‘t get that public option, what should the president do? Where should his leadership take this country? Should he just say to the Republicans, OK, no reform this year, let‘s go to midterm, we‘ll see if the polls next November in 2010 and we‘ll let the people decide and let them pay the price? What about that strategy?

DEAN: The—no. We‘ve got to have a bill and it‘s going to have to be a strong bill. You know, the public rewards strong leadership, not weak leadership. And the president now knows what the bill has—what has to be in the bill and he knows we have to have one and we‘re going to have one. That‘s going to be a good one. It‘s going to have a strong public option in it.

SCHULTZ: Dr. Dean, great to have you with us. Thanks so much.

DEAN: Ed, thanks for having me on.

SCHULTZ: You bet.

In my op-ed I told you that this is defining moment for President Obama. Jonathan Alter wrote the book, “The Defining Moment” about FDR. He‘s also a senior editor for “Newsweek.”

Great to have you back.

JONATHAN ALTER, NEWSWEEK: How are you, Ed?

SCHULTZ: I‘m doing great. We‘re hot and heavy in this. Good to have you back off vacation and back at it.

SCHULTZ: Is this a defining moment for President Obama in this—the totality of trying to get reform?

ALTER: I think the next six weeks are. You don‘t want to say it is this week, but he will have a huge defining moment when he goes before a joint session of Congress which I expect him to do. I don‘t have any inside knowledge that he‘s doing this, but I would expect that he‘s going to have to go to the country and the best format for him is the one that he used, you know, last winter where he performs very, very well.

And that will be a true moment of truth if he can bring the country with him on this legislation. I think it‘s a terrible idea, by the way, just to go.

SCHULTZ: Yes?

ALTER: Because you and I have known each other for a while.

SCHULTZ: Sure. Sure.

ALTER: Actually the idea of putting this off and taking it to the people in 2010. We can‘t do that. We‘ve got to get this done.

SCHULTZ: I know.

ALTER: Now there‘s too many other important parts in this bill that are frankly much more important than a public option which I‘m totally for. A public option is a means to an end. It‘s a means to control in cost. There‘s many—there are guarantees in here for coverage so that we stop kicking sick people when they‘re down.

We‘ve outlawed discrimination against sick people. The idea that this bill is just toilet paper if there‘s no public option is frankly ridiculous. There‘s major, extraordinarily important things that are in this bill.

ALTER: We‘re talking now about Democrats, and the assumption that all Democrats, Kent Conrad and all the rest, are somehow going to be crow barred into going for some particular version for this bill, the legislative process is a give and take. If they can come up with a co-op that is super strong.

SCHULTZ: There you go.

ALTER: Super glue. You can‘t.

SCHULTZ: Liberals wouldn‘t take that, Jon.

ALTER: Well, they should.

SCHULTZ: They wouldn‘t.

ALTER: They‘re being fools. They‘re being fools.

SCHULTZ: Why?

ALTER: Because it‘s great.

SCHULTZ: That‘s not going to bring costs down. It‘s not going to control cost.

ALTER: You have a huge national co-op. Nobody knows that. First of all, health care economists don‘t know that. Nobody knows. You can create something new in this world that can work if you bullet-proof it. The point is, Ed, look, I‘m for a public option.

SCHULTZ: Yes.

ALTER: I don‘t want people to misunderstand me.

SCHULTZ: Yes. I know. I know.

ALTER: I think they should go to the mat for a public option. Get this idea.

SCHULTZ: Draw the line on the sand, I agree.

ALTER: No, no. I don‘t want them drawing lines in the sand. That‘s not how you get legislation done. I think they should push as hard as they can. But the point is this. Almost nobody who voted for Barack Obama for president voted for him because he was for a public option.

ALTER: No, no, no. No, no, but you can—first of all, you‘ve got reconciliation. You can do a lot with 50 votes. We‘re talking about getting Democrats, OK?

SCHULTZ: OK.

ALTER: All right? So I‘m with you. I agree with Howard Dean that it‘s clarifying that now we can just deal with Democrats. But this assumption that all Democrats are necessarily going to go along with a particular version of this bill is unrealistic. OK? Right now.

SCHULTZ: They have to go.

ALTER: No, they don‘t have to.

SCHULTZ: . with a public option.

ALTER: We don‘t want to.

SCHULTZ: They have.

(CROSSTALK)

ALTER: Are you a health care economist? Do you know for sure that it‘s the only way that we can.

SCHULTZ: Can I—well, it‘s a mean of covering everybody. Single payer? Can I see some CBO figures and an actuary on single-payer? We‘re waiting for the CBO to come back, but I will tell you this.

ALTER: I‘m for single-payer, by the way.

SCHULTZ: That‘s right. I know you are.

ALTER: Yes.

SCHULTZ: You‘re a good guy. A great guy. All right. The bottom line is this president went out on the campaign trail in ‘07 and talked about reforming health care and talked about going after the insurance industry.

ALTER: Not—the details of this have been influx on the guy. Got hammered by Hillary Clinton because he was against an employer mandate. Without an employer mandate, you have no program. The details need to be put in perspective, Ed. They are details. The principle.

SCHULTZ: They are going to cover every American.

ALTER: Yes. Well, that‘s the principle. That‘s the principle.

SCHULTZ: And repeal the Bush tax cuts. Repeal the Bush tax cuts.

ALTER: But you don‘t need.

SCHULTZ: Tax the top 10 percent.

ALTER: You do not need a public option to cover every American. You can do that by laws very easily and all this bills do. OK?

SCHULTZ: But the public option is just that.

ALTER: So let‘s be clear about what a public option is. It‘s a detail.

SCHULTZ: OK. And the way you do that is get the Republicans out of the way, because they are obstructionist. They will never go through with this reform.

ALTER: I agree with you on that.

SCHULTZ: They will never go.

ALTER: I agree with you on that.

SCHULTZ: All right. We‘ll end on that note.

ALTER: But liberals are driving themselves over the cliff if they go.

SCHULTZ: All right. Jonathan Alter.

ALTER: If it‘s public option or bust. It‘s a disaster.

SCHULTZ: “Newsweek”—OK, Jonathan Alter, senior editor, “Newsweek,” has written some great stuff. You believe that it‘s a civil right issue. And we‘ve got to have you come back to talk about that because that‘s what I thought we were going to talk about tonight. Lots going on.

SCHULTZ: You can‘t negotiate with Jon Kyl. Jon Kyl said yesterday he‘s against the co-op.

ALTER: I don‘t want to negotiate with the Republicans. Screw the Republicans.

SCHULTZ: I got to go to a break or I‘m going to get fired. Hang on a second. My next guest says I‘m lying about it. I‘ll go head to head with him. Jonathan Alter is a great guy. You know, we do this at work, too, when we‘re not on TV. We‘re right back on THE ED SHOW.

(COMMERCIAL BREAK)

SCHULTZ: It‘s true, I need shower. All right. The middle class has been kicked in the teeth by the righties for the last eight years. And they‘re fixing to deliver us another jawbreaker on health care.

Former congressman, Ernest Istook, and I got into it last night. I‘m true to my word. I asked him to come back. He‘s true to his. We‘re going to get into it next. Stay with us.

(COMMERCIAL BREAK)

SCHULTZ: Welcome back to THE ED SHOW. Being a man of my word, I got a little heated under the collar last night on the program. I was debating one of our panels about health care and we ran out of time. I promised him, I want to have him back so here we are, night number two.

Now it‘s time for round two, our passionate and honest debate. Former congressman, Ernest Istook, a distinguished fellow at the Heritage Foundation, joins us tonight.

Mr. Istook, let‘s talk money if we can tonight because if there‘s one thing the Obama administration has not done is completely detail how they want to pay for any kind of reform that they‘re doing. The president has said revenue neutral, not going to add to the deficit.

The math that I‘m doing, I don‘t know how they can do it without a tax increase. Let me ask you, what would be wrong with repealing the Bush tax cuts and getting that money back from the top 2 percent? Why would you would be against that? I think you are. Why would you be against it?

ERNEST ISTOOK, HERITAGE FOUNDATION: Well, because I want people to continue to have jobs. I want the economy to flourish. I don‘t want to take the people who are the entrepreneurs, who take—create jobs and tax them in a way that diminishes them.

In fact, right now one of the things holding back the economy is knowing that the Bush tax cuts are going to expire. So people know that there‘s an automatic tax increase already coming up in the next year or two. And so they‘re already holding back.

SCHULTZ: So you think people aren‘t out creating jobs because they think the Bush tax cuts.

ISTOOK: Not the way that they should.

SCHULTZ: . are going to be repealed?

ISTOOK: That is one thing. I‘ve talked to plenty of people in businesses that are holding back because they know, even apart from whatever may come out of this Congress, this president, they already know that automatic tax increases are coming in.

SCHULTZ: Well, I talked.

ISTOOK: Because the Bush tax cuts are temporary.

SCHULTZ: I‘ve talked to a lot of middle classers that wouldn‘t be bothered at all.

SCHULTZ: If the top 2 percent—I mean that is a theory that if we repeal the Bush tax cuts, that the economy is going to be hurt even more, that if we keep these tax cuts in place for the top 2 percent, that the economy is going to flourish.

I think it‘s manufacturing and that‘s a different story. But I want to talk about this health care. If you repeal the Bush tax cuts, you‘re going to pay for the health care reform that‘s on the table right now, at least the last numbers that we had. But why is it that the Republicans seem to be against any kind of reform?

They‘re against the public option, they‘re against the co-op. Heck, the co-op hasn‘t even been detailed yet you got Jon Kyl out there saying well, he‘s against it. Do the Republicans want anything to change?

ISTOOK: Let me see if I can address that. I think you covered about three different things. First, back on the Bush tax cuts. The Heritage Foundation has some great papers showing what this is doing to the economy. Second, the notion that those tax increases, whether they‘re automatic or additional ones, would pay for Obama‘s tax plans is just not so.

He even says in his town hall meetings that—he claims that most of it is going to come from cutting Medicare and Medicaid expenditures.

SCHULTZ: No, he‘s not going to cut Medicare and Medicaid. That‘s one of the lies that‘s out there.

SCHULTZ: Not to the hospitals. Not to the hospitals. Mr. Istook, that‘s not true.

ISTOOK: Well, for the doctors?

SCHULTZ: Now I give you credit. I give you credit.

ISTOOK: That‘s been a year after year, the claim by Congress that would save money by future cuts.

SCHULTZ: Look, here‘s—the Medicare reimbursement rates are going to have to change if we go with the public option. There‘s no question by that. But you‘re going to get that money by repealing the Bush tax cuts.

I want to ask you about why haven‘t the Republicans.

ISTOOK: But that money doesn‘t come from the Bush tax cuts.

SCHULTZ: No, no, no. Look, you were handed a surplus and we ended up with massive deficits, record deficits.

ISTOOK: OK.

SCHULTZ: Record foreign debt and everything else. I want to know, where is the Republican plan?

ISTOOK: Well, there‘s not one plan that‘s a Democrat plan. There‘s not one plan that‘s a Republican plan. But you can talk to Senator Mike Enzi, you can talk to Senator Tom Coburn, Senator Jim DeMint, Senator Richard Burr.

SCHULTZ: OK.

ISTOOK: All of whom have introduced legislation on proposals to make health care more affordable. Congressman Tom Price, Congressman John Shadegg, Congressman Paul Ryan.

ISTOOK: I see. You‘re not asking whether people have legislation to help the public, you‘re asking whether people have legislation that goes along with your liberal approach.

SCHULTZ: You don‘t think reeling in the insurance industry is going to help the public? You don‘t think reeling in the insurance industry and getting competition is going to help the public?

ISTOOK: Here‘s the thing, Ed. You claim that they don‘t have a plan. Actually they do have lots of plans, you just don‘t like their plans. Now it‘s intellectually honest to say you don‘t like their plans but to say that there‘s no plan at all being put forth by people that have an R after their name is not accurate.

SCHULTZ: OK, I tell you what.

ISTOOK: Also, it would be inaccurate to say.

(CROSSTALK)

SCHULTZ: Here‘s what I‘d like you to do. I would like you to pick whatever plan you like on the Republican side who has ever—who‘s authored this. You threw some names out, get them on this program and I‘ll give them two segments on this show to explain.

ISTOOK: Hey, that‘s great.

SCHULTZ: . what their plan is because I don‘t think it exists. It‘s not there. Reform is not there for Republicans. They‘re against everything.

SCHULTZ: OK. It is. Exactly. Unedited microphone is the greatest thing on the face of the earth, my friend.

ISTOOK: OK.

SCHULTZ: Good to have you on with us, Ernest.

ISTOOK: Thanks, Ed.

SCHULTZ: Up next, GOP fear mongerer? Frank Luntz, he‘s flapping his mouth again. Ratcheting up the talking points on Medicare. Luntzer‘s lies land him on “Psycho Talk”. Stay with us.

(COMMERCIAL BREAK)

SCHULTZ: Welcome back to THE ED SHOW. Psycho Talk tonight; the mastermind behind the GOP assault on the health care reform, Frank Luntz. It was just a matter of time before the righties started pushing the lie that health care reform would mean cuts to Medicare benefits. Last night, Luntz stepped up to the plate.

(BEGIN VIDEO CLIP)

FRANK LUNTZ, GOP POLLSTER: Barack Obama, from this language—I‘ve got the text—it‘s almost like he‘s declaring war on Medicare, because it‘s the only way for him to be able to pay for health care. They are talking about lowering the reimbursements for Medicare.

(END VIDEO CLIP)

SCHULTZ: Hold it right there. That is a flat-out lie. Let me be very clear on this. FactCheck.org and the AARP state clearly that none of the bills being considered in the Congress would lower reimbursements for Medicare.

Now, here‘s what would actually happen. The House bill would trim projected increases in payments to hospitals, insurance companies and pharmaceutical companies. But it would increase payments to doctors. And it would lower prescription drug costs for people in that notorious Medicare Part D doughnut hole.

Bottom line, none of the proposals will cut benefits or increase out of pocket expenses for seniors, period. Nada. Ain‘t going to happen. So the latest GOP attack that the president is declaring war on Medicare, you know what that is? It‘s focus group, lying, scum-belly Psycho Talk.

And coming up, you know, I‘ve got a tip for all you town hall whackos out there, steer clear of Barney Frank. You don‘t be messing with Barney. We‘ll show you what happened at a town hall last night when he took on a protester. He‘ll show you how to talk to them.

Plus, thousands of the faithful just wrapped up a conference call with the president of the United States. The mission is to make all Americans realize that this is a moral issue. A key leader of the movement joins me with reaction in my playbook. Stay with us.

(COMMERCIAL BREAK)

SCHULTZ: Welcome back THE ED SHOW. Got some advice for the Obama White House, you dance with the one who brought you. Progressives put the president in office. All last year, they knocked on doors, raised money, got out the vote, did it all. So comments like this really burn me up. Here‘s an anonymous Obama adviser quoted in the “Washington Post” today: “I don‘t understand why the left of the left has decided that this is their Waterloo, said a senior White House adviser, who spoke on the condition of anonymity. We‘ve gotten to the point where health care on the left is determined by the breadth of the public option. I don‘t understand how that has become the measure of whether what we achieve is health care reform.”

OK, this is what‘s known as a five-second cooling off period.

I wonder where the left of the left got the idea that a public option was key to health care reform.

(BEGIN VIDEO CLIP)

OBAMA: I also strongly believe that one of the options in the exchange should be a public insurance option.

We should have a public plan to compete with the private plans. But, you know, these private insurance companies are always telling me what a great deal that they give to the American consumer. If it‘s such a great deal, why are they worried about competing against the public plan?

We will not sign a bill that isn‘t right for the American people. And I‘m for the public option.

(END VIDEO CLIP)

SCHULTZ: Joining me now is Congressman Dennis Kucinich, vice chair of the Progressive Caucus. Congressman, great to have you back on THE ED SHOW.

REP. DENNIS KUCINICH (D), OHIO: Great to be with you,Ed.

SCHULTZ: Is the president playing this correctly? Is he patience going to pay off? Or is it time for him to get tough with Republicans, in your opinion?

KUCINICH: First of all, you raised a question about the left. And I think it is all about the left. It‘s about 47 million left without insurance, about another 50 million left as uninsured. Millions left bankrupt because they can‘t afford to pay hospital bills. It‘s about what‘s left.

I think that the president needs to go back to the drawing board actually, because the only true public option that will work is HR 676, the bill that I drafted with John Conyers, which is a single-payer, not-for-profit bill, that recognizes that one out of every three dollars in the system goes for the activities of the for-profit system. This is what the whole fight is about.

It‘s about a fight over 800 billion dollars. And the insurance companies will stop at nothing to hold on to the American people‘s wallet when it comes to health insurance.

SCHULTZ: So with that landscape, the way you see it and the way I see it, is the president gambling with the base that put his administration in office and also put the majorities in the House and the Senate? I mean, I get it all the time from people on the radio and e-mails and messaging, that look, they‘re fed up with the niceties to the Republicans. They‘re not serious about a public option, and certainly not serious about single-payer. So when does the president step up in your opinion?

KUCINICH: It is. But I would suggest to you, Ed, that this an issue that‘s even bigger than the president of the United States. What I think needs to happen is that Democrats have to go back to the people, not trying to force HR-3200 down their throats, but to listen at those town hall meetings to what people have to say about their experience with insurance companies.

Insurance companies make money not providing health care. If we hear from the people, then we can build the ground swell necessary to pass a bill.

SCHULTZ: Why are the Democrats in the Senate missing this? And why has the White House had a hard time communicating the message. The NBC poll last night very clear. Four big lies, more than 50 percent of the American people believe the Republican lives being thrown out there. Somebody is not saying straight talk to the American people on where they stand from the White House.

KUCINICH: Well, the message has been mishandled. I think that is something many people can agree on. When you see that, you don‘t go forward into the breech. You step back and you start over. You know what? There‘s time to start over without any embarrassment, by listening to what the American people are saying, by seeing the confusion that‘s considerable, and looking at the interest groups that are trying to tilt the balance against the public interest.

I think that we need to go back to the people in town hall meetings everywhere, where we hear about people‘s experience with the insurance companies. No one is talking about that.

SCHULTZ: What about this political strategy: don‘t do health care reform; blame the Republicans; they‘re the obstructionists; let‘s go back to the polls in the midterm. What do you think?

KUCINICH: I don‘t know. I mean, there‘s an underlying issue here of the economy. People are out of work. They‘re losing their homes, their jobs, their investments. That goes into this mix. There‘s a lot of frustrated people out there. They have every right to be frustrated. They see Wall Street getting hundreds of billions, even trillions of dollars in bail outs, and they‘re wondering, hey, where‘s my bailout? What‘s in it for me?

This health care—

SCHULTZ: Is a bailout. To a lot of Americans, it‘s a big help.

KUCINICH: Well, there is a bailout for insurance companies, since government is subsidizing insurance companies, and for the pharmaceutical company, Ed, who are getting the gift of a ten-year extension to the Medicare Part D, taking the caps off the price controls, and drug companies don‘t have to worry about the drug reportation, which would lower costs.

So this is a giveaway to private insurance and pharmaceutical interests. And frankly, I don‘t think—I think we should be finished with government subsidizing the private sector.

SCHULTZ: Amen. Congressman, great to have you on. You‘re a great fighter for the people. I appreciate it. I know things are a heck of a lot better in the House than they are in the Senate when it comes to understanding all of this.

KUCINICH: Thanks, Ed. Kucinich.US, check it out.

SCHULTZ: You bet, my man. Thank you. We have been keeping close watch on the Senate race in Pennsylvania. Today on Twitter, Senator Arlen Specter made a strong statement in favor of a public option. He wrote, “people who like their current insurance ought to be able to keep it. But let‘s have one more choice, a public option.”

His challenger, Congressman Joe Sestak, is a strong supporter of the public option. He said he would find it hard to vote for a bill without a public option.

Coming up, when Jesus walked the face of the Earth, he was feeding the hungry, clothing the poor and healing the sick. He didn‘t ask anybody for their insurance card, and he didn‘t heal anybody for profit. I‘ll talk to a key religious leader who‘s calling out the president next in my playbook. Stay with us.

(COMMERCIAL BREAK)

SCHULTZ: In my playbook tonight, health care as a moral imperative. Last week on this show, I talked about how religious leaders need to be speaking up in the fight for reform. Making sure Americans are covered is really a moral issue. And I‘m not the only one who thinks so. Christian, Jewish and Muslim leaders across the country have joined forces in a national campaign for health care reform.

And just in the last hour, they heard directly from the president of the United States on a conference call.

Joining me now is Reverend Jim Wallis, president of Sojourners. The reverend participated in that conference call with President Obama this evening. Reverend Wallis, nice to have you on THE ED SHOW tonight. Thank you so much.

REV. JIM WALLIS, PRESIDENT, SOJOURNERS: Hello, Ed. Great to be with you.

SCHULTZ: The morality of this; if we doe not take care or offer up the opportunity to cover all Americans, what does that say about us as a nation morally?

WALLIS: Well, many of us in the faith community have gotten very concerned, because, with all the shouting and the anger and the hate now we‘re seeing in town meetings, we‘re losing, I fear, the moral core of this debate, which is that a lot of people are hurting in this broken health care system.

As you said, 47 million haven‘t got insurance. But even those who do can‘t—don‘t get what they need, can‘t afford to be healthy in America. So this for us is a moral issue. As you said before, for Jesus, healing was a sign of the kingdom of god. This is right at the heart of our vocation. It‘s also not nice to lie. And a lot of people are lying about this whole debate.

We felt we had to speak out tonight. We had a great conference call.

Tens of thousands of people came on the call.

SCHULTZ: What did the president say?

WALLIS: Well, it was good. He said, number one, not just how important health care is, but he said this is a moral issue. This is a moral imperative. So many people are left outside this health care system. And he said the role of the faith community is critical here. He pointed out that historically all the great social movements, really, that have been successful have had the faith community at the heart of it.

So I think he called it for a victory of hope over fear. Right now, fear is controlling this debate. And we have to start talking about truth telling, telling truth, and then what is the moral core? We can‘t lose the moral core, which is people, our friends, our neighbors, our loved ones are hurting. The broken system has to be fixed. And the faith community is not going to settle for anything less, Ed, than full, accessible health care coverage for all of God‘s children.

SCHULTZ: So the faith community isn‘t going to settle for anything less than everybody getting covered?

WALLIS: Absolutely. Not at all.

SCHULTZ: All right, this is the president tonight on that conference call, an excerpt from it. Here it is.

And there are some folks out there who are, frankly, bearing false witness. These are all fabrications that have been put out there in order to discourage people from meeting what I consider to be a core ethical and moral obligation. And that is that we look out for one another, that I am my brother‘s keeper, my sister‘s keeper.

And in the wealthiest nation on Earth right now, we are neglecting to live up to that call.

(END VIDEO CLIP)

SCHULTZ: Reverend Wallis, I‘ve got to ask you, the more visible the very visible faith leaders in this country, Rick Warren, Joel Osteen, Franklin Graham, the guys that get on TV a lot, that attract millions of viewers and what not, why have they been so silent? Does that puzzle you at all?

WALLIS: Well, on the call tonight, we had Evangelical mega-church pastors. We had Catholics, Jews, Muslims, all kind of folk. Many are very prominent. So I think you‘re going to hear, Ed, a steady moral drum beat from the faith community for accessible, full coverage for all Americans, all of God‘s children.

SCHULTZ: So would that support a public option what you just said?

In definition, would that support what the president wants?

WALLIS: The bottom line is we have to make sure everybody gets covered. All those who were left out, those who don‘t have enough insurance, we have to make sure everyone is covered. And we have to start telling the truth. So however we do it—our job is to say, like the Prophet Amus, let justice roll down like waters, righteousness like an ever flowing stream.

Let the politicians work on the plumbing. But our job is to say what has to be done. And we won‘t settle for anything less than full coverage for all of god‘s children in this country. That is a moral imperative. We‘re united on that, right across the board.

SCHULTZ: Fantastic. Reverend Wallis, you got to come back. I feel good talking to you.

WALLIS: People can listen to this. It‘s already online. It‘s at Sojo.net/healthcare. You can listen to it online tonight. It was a great conversation.

SCHULTZ: Pray for us, Reverend.

WALLIS: Keep quoting Jesus.

SCHULTZ: Well, he was healing the sick, I certainly know that.

Appreciate your time, reverend. And one last page in my playbook tonight. Congressman Barney Frank faced some amped up protesters at his townhall meeting yesterday. But he stood his ground. In one exchange, the Congressman, who is Jewish, took on a woman clutching a picture of President Obama made to look like Hitler. Check out how Barney Frank threw it right back at her.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: Why are you willing to support a Nazi policy, as Obama has? Why are you supporting it?

REP. BARNEY FRANK (D), MASSACHUSETTS: When you ask me that question, I‘m going to revert to my ethnic heritage and answer your question with a question. On what planet do you spend most of your time?

Trying to have a conversation with you would be like trying to argue with a dining room table. I have no interest in doing it.

SCHULTZ: And I guess you could say that‘s how it‘s done, folks. Congressman Frank directly engaged these nut jobs. He pointed out exactly how dumb they sound, and by pointing out the inherent ignorance of their arguments. He took away their soap boxes. Barney Frank tells it like it is. I just wish more Democrats would show some backbone that way.

Coming up, people are losing faith in the system when it comes to health care reform. Mr. President, surrender is not an option. If you give up on us, there‘s going to be hell to pay, I think. I‘ll put that to our panel next on THE ED SHOW, right here on MSNBC.

Joe, let me ask you, is there any wiggle room with your audience on the radio when it comes to a government-run program to compete with the private sector?

JOE MADISON, XM RADIO TALK SHOW HOST: Absolutely none. I mean, 100 percent. And you usually can‘t say that about my audience. As a matter of fact, today, my frustration level got so high—and I understand inside the Beltway politics. I understand the arithmetic in the House and the Senate.

But Ed, I‘m suggesting that the same coalition that brought Barack Obama to the White House has to step up now. I heard someone suggesting this is like the Civil Rights Movement. We need—and I‘m saying this to labor. I‘m saying this to Hollywood. I‘m saying this to 40 million uninsured people. We need a march on Washington between now and October. And I bet you that those eight Blue Dog Democrats, when they look out on that mall, and they can see hundreds of thousands of people, it will make a difference.

We need to now step up. Remember what Johnson said to Martin Luther King in ‘65? Make me do it.

SCHULTZ: Tim Griffin, is the White House off message? Have they gained any ground the last 24 hours to get back on point?

TIM GRIFFIN, REPUBLICAN STRATEGIST: I think their biggest problem is a lot of us aren‘t sure what their plan is. We don‘t know how they‘re going to pay for health care reform. We‘re not sure whether they want a public option or not. I think what they‘ve done here that‘s hurt them is they‘ve given so much of the authority to determine this reform to the Hill. A lot of it was in response to what happened with the Clintons and their proposals. But they‘ve given so much of this to the Hill that it‘s hard for me and others to know precisely what the president wants.

GRIFFIN: I think there was probably a sweet spot somewhere in the middle. But I just want to say this, it‘s not just the Blue Dogs that are backing away from the public option. You have Vic Snyder, who is known—he‘s here from Little Rock, where I am. He‘s known as a liberal and he‘s backed away from a public option.

SCHULTZ: We‘ll, it could cost him, if he‘s not with it. Jamal Simmons, there‘s talk of utilizing the Clintons. Is that a possibility? Could they be used at this point?

JAMAL SIMMONS, DEMOCRATIC STRATEGIST: They might be. I don‘t know if they will or not. This president has his own voice. And I think Americans voted for him because they trusted him to pull off a health care plan. But let‘s keep one thing in mind—I know time is short—if we don‘t get a public option—and I‘m far public option. We ought to have one. I think it‘s good for competition.

If we don‘t get a public option, this bill still will make it illegal if you raise my premiums because I get sick. It will make it illegal if you raise my premiums because my co-worker got cancer and now you want to charge me more money. It will make it illegal to do a lot of things that we want to stop doing. We are going to get rid of this pre-existing condition problem.

So we‘ve got to stay focused on the bigger issue.

SCHULTZ: Jamal, thanks so much. Panel, sorry short on time tonight. It got away from us. We‘ll have you back for sure. “HARDBALL” with Chris Matthews is up next right here on MSNBC. See you tomorrow night.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.